{"id":9251,"date":"2019-03-05T18:45:53","date_gmt":"2019-03-05T23:45:53","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/disrupting-donald-draper-programmatic-ad-buyings-effect-on-the-advertising-industry\/"},"modified":"2019-03-05T18:45:53","modified_gmt":"2019-03-05T23:45:53","slug":"disrupting-donald-draper-programmatic-ad-buyings-effect-on-the-advertising-industry","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/disrupting-donald-draper-programmatic-ad-buyings-effect-on-the-advertising-industry\/","title":{"rendered":"Disrupting Donald Draper: Programmatic Ad-buying\u2019s Effect on the Advertising Industry"},"content":{"rendered":"

Donald Draper, the protagonist of AMC\u2019s hit 50s-era series Mad Men, <\/em>is depicted as one of Madison Avenue\u2019s smoothest advertising executives. He focuses on charm, style, and an innate understanding of the American consumer. Somehow, (in the show), he succeeds.<\/p>\n

Modern advertising has changed so drastically that Don might find himself considerably out of date. Today\u2019s advertising is more scientific and quantitative than ever before, and requires deep understanding of publisher metrics, customer behavior, and computer science. A large part of this is due to programmatic advertising, which has revolutionized the way marketers reach audiences through targeted digital ad placement [1].<\/p>\n

What is programmatic advertising?<\/strong><\/p>\n

Programmatic advertising refers to the use of automated processes to buy, place, and optimize advertising. This is in contrast to the traditional model of advertising in which ad agencies (e.g., Ogilvy & Mather) or marketers (e.g., Kraft-Heinz) directly contract with publishers (e.g., ESPN.com). Exhibit 1 shows an overview of these two approaches.<\/p>\n

Exhibit 1: Overview of traditional vs. programmatic advertising models [2]<\/p>\n

\"\"<\/a><\/p>\n

 <\/p>\n

Due to its real-time bidding structure, the programmatic approach is best suited for online advertisements. In 2017, global programmatic advertising spending totaled approximately $80 Billion \u2013 representing 45% of all online advertising, and 14% of all advertising [3]. The sector is also expected to grow rapidly. TechNavio, a market research firm, estimates that programmatic advertising will grow at a CAGR of 21% from 2017 to 2022, and come to represent $210 Billion, 29% of global ad spending [4]. It is clear the industry\u2019s shift to programmatic advertising is significant and will continue into the future.<\/p>\n

Exhibit 2: Global programmatic advertising market size, 2017-2022 [4]<\/p>\n

\"\"<\/a><\/p>\n

How does programmatic advertising create value?<\/strong><\/p>\n

Programmatic advertising creates value for marketers by allowing them to target advertisements for maximum impact. For example, a company advertising de-icing salt might focus their ads on users who live in areas experiencing cold weather. By focusing advertising on their target consumers marketers can increase their return on investment. They also save valuable time, as shown in exhibit 3.<\/p>\n

Programmatic advertising also creates value for publishers by ensuring that their inventory (i.e., ad space) is maximally utilized. Through the real-time bidding mechanism programmatic advertising ensures that inventory is most efficiently allocated to the highest bidder.<\/p>\n

Finally, programmatic advertising creates value for consumers by showing them relevant, timely ads that may fill a genuine consumer need.<\/p>\n

Exhibit 3: Time savings with programmatic advertising [5]<\/p>\n

\"\"<\/a><\/p>\n

\u201cThe winners\u201d<\/strong><\/p>\n

\u00a0<\/strong>The shift to programmatic advertising has benefitted a number of sectors involved in measuring, analyzing, and optimizing advertising spending. Exhibit 3 shows several of these sectors and their role in programmatic advertising.<\/p>\n

Exhibit 3: The programmatic media landscape [6]<\/p>\n

\"\"<\/a><\/p>\n

Winner #1: Ad exchanges<\/em><\/strong><\/p>\n

Examples: Google\u2019s DoubleClick Ad Exchange, AppNexus<\/em><\/p>\n

Advertising exchanges run the real-time bidding process at the heart of programmatic advertising and are one of the most direct winners in its growth. Ad exchanges capture value by charging setup fees and commissions to the publishers seeking to sell inventory on the exchange.<\/p>\n

Winner #2: Supply side platforms<\/em><\/strong><\/p>\n

Examples: Google AdX, Pubmatic<\/em><\/p>\n

Supply side platforms, also called Yield Optimization Platforms, enable publishers to effectively manage their inventory and revenue on ad exchanges. By automating the sale of publishers\u2019 ad inventory, they create value for publishers. Several software companies focus exclusively on this market segment and have benefitted from the rise of programmatic advertising.<\/p>\n

Winner #3: Demand-side platforms<\/em><\/strong><\/p>\n

Examples: Amazon Advertising, DoubleClick BidManager, Brightroll, DataXu<\/em><\/p>\n

Demand-side platforms allow marketers (e.g., Kraft-Heinz) to manage multiple ad and data exchange accounts to accomplish an advertising goal. For example, BrightRoll might help Kraft-Heinz optimize its advertising across five separate exchanges to maximally effect brand perceptions among 25-39-year-old females.<\/p>\n

Winner #4: Third party data providers<\/em><\/strong><\/p>\n

Examples: Lotame, BlueKai, Exelate<\/em><\/p>\n

Third party data providers help marketers and their demand-side platforms better identify their \u201ctargets.\u201d The data that third party providers give \u2013 such as detailed consumer targeting data \u2013 helps marketers design better campaigns. Data providers capture some of this value by charging marketers access fees. These companies also frequently accept payment \u201cin-kind\u201d \u2013 i.e., they allow marketers to trade data on their customers in exchange for third party data [7].<\/p>\n

\u201cThe Losers\u201d<\/strong><\/p>\n

Programmatic advertising\u2019s growth has negatively impacted a number of players in the traditional advertising model. In addition, the future promises more pain: programmatic advertising is expected to continue expanding, and will likely be introduced in advertising media currently considered off-limits (e.g., TV, radio, outdoor).<\/p>\n

Loser #1: Media agencies<\/em><\/strong><\/p>\n

Examples: WPP, Omnicom, Publicis<\/em><\/p>\n

Media agencies are the primary losers of the shift to programmatic advertising. Initially, media agencies saw programmatic advertising as a growth area; they quickly built staffs and expertise in programmatic campaign development. However, a series of scandals (involving programmatic ads showing up in less-than-desirable locations, coupled with inaccurate metrics) convinced many marketers to develop in-house programmatic advertising management capabilities. It is seen as unlikely that this business will return to the media agencies. Billings at WPP, the world\u2019s largest media agency, declined 3.9% in 2017 [8].<\/p>\n

Loser #2: Owners of other forms of \u201cbroadcast\u201d media<\/em><\/strong><\/p>\n

Examples: TV station owners, radio station owners<\/em><\/p>\n

The additional value created by programmatic advertising is likely to reduce the proportion of advertising spending allocated to traditional forms of broadcast media. While this effect will take a number of years to materialize, and can be offset by overall market growth, I believe that the market\u2019s shift towards personalized, \u201cnarrowcast\u201d media is likely to continue. Owners of broadcast media outlets will likely try to find alternate ways of targeting customers (e.g., through cable subscriptions). Once this is achieved, these media types are likely to join programmatic marketplaces.<\/p>\n

Loser #3: Workers<\/em><\/strong><\/p>\n

Programmatic advertising requires less manual input and adjustment than traditional advertising, as shown in exhibit 3. This has led to a reduction in employee needs. These job losses may, in time, be offset by increased demand for data scientists, engineers, and other highly-trained computer professionals. However, the short term impact is a reduction in employment.<\/p>\n

Exhibit 5: Job growth in the Media & Advertising sector [9]<\/p>\n

\"\"<\/a><\/p>\n

Towards a more efficient marketplace<\/strong><\/p>\n

Programmatic advertising represents a new, more efficient process for buying, placing, and optimizing advertisements. In just a few years, programmatic ad-buying has become the majority of the online advertising market, and shows little sign of slowing. Over time I feel confident that the opportunities created by expanding programmatic advertising will unlock new ways for marketers and consumers to interact.<\/p>\n

 <\/p>\n

[1] https:\/\/medium.com\/axialx\/programmatic-advertising-explained-666c52978ea5<\/a><\/p>\n

[2] https:\/\/www.match2one.com\/blog\/traditional-vs-programmatic-media-buying\/<\/a><\/p>\n

[3] https:\/\/insights-technavio-com.prd2.ezproxy-prod.hbs.edu\/report\/global-ad-spending-market-analysis-share-2018<\/a><\/p>\n

[4] https:\/\/insights-technavio-com.prd2.ezproxy-prod.hbs.edu\/report\/global-programmatic-advertising-spending-market-analysis-share-2018<\/a><\/p>\n

[5] https:\/\/www.bcg.com\/en-us\/publications\/2018\/guaranteed-opportunity-programmatic-advertising.aspx<\/a><\/p>\n

[6] https:\/\/digilant.com\/programmatic-buying-101-whats-the-difference-between-dsps-ad-networks\/<\/a><\/p>\n

[7] https:\/\/adage.com\/lookbook\/article\/ad-exchange\/needed-ad-exchanges-work\/298394\/<\/a><\/p>\n

[8] https:\/\/sites.wpp.com\/annualreports\/2017\/\/<\/a><\/p>\n

[9] https:\/\/www.theatlantic.com\/business\/archive\/2018\/02\/advertising-jobs-programmatic-tech\/552629\/<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Who wins and loses in the global shift to programmatic advertising?<\/p>\n","protected":false},"author":10124,"featured_media":9261,"comment_status":"open","ping_status":"closed","template":"","categories":[658],"class_list":["post-9251","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-advertising","hck-taxonomy-organization-wpp","hck-taxonomy-industry-advertising","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/dig-it-blog-post-assignment-ii-digital-winners-and-losers\/","yoast_head":"\nDisrupting Donald Draper: Programmatic Ad-buying\u2019s Effect on the Advertising Industry - Digital Innovation and Transformation<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-digit\/submission\/disrupting-donald-draper-programmatic-ad-buyings-effect-on-the-advertising-industry\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Disrupting Donald Draper: Programmatic Ad-buying\u2019s Effect on the Advertising Industry - 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